Today, the Board of Directors for College Savings Mississippi voted unanimously to reopen the Mississippi Prepaid Affordable College Tuition (MPACT) program to new enrollments beginning in the Fall of 2014. “The Board’s decision brings our thorough, deliberate evaluation of MPACT’s fiscal soundness full circle,” says Treasurer Lynn Fitch. “The audit’s recommendations will take time to be implemented prudently,” Treasurer Fitch continues, “but the Board’s decision allows MPACT to remain an option for families in planning for a college education, in a fiscally responsible way.”
“I thank Treasurer Fitch for looking out for the interests of taxpayers and evaluating the MPACT program,” Governor Phil Bryant said. “Mississippi must continue to build an outstanding workforce, and a college education is an important component of the career path for many students.”
The College Savings Board voted to defer enrollment in the MPACT program in late 2012, amid concerns that MPACT may not be sustainable due to its funding shortfalls. The Board then ordered an independent actuarial audit of the program. This was the first time an actuarial audit had ever been conducted for MPACT.
The audit confirmed that MPACT faced serious shortfalls and ran the risk of running out of money within the next ten years. MPACT currently faces a projected shortfall of approximately $82 million. If the program were to be closed permanently, the shortfall would rise to $142 million.
As the College Savings Board works to reopen MPACT, there is a strong consensus regarding several important considerations.
· New MPACT contracts must be priced appropriately and not add to the existing shortfall. In 2012, before enrollments were deferred, 248 new enrollees added an estimated $211,000 to the program’s liability further reinforcing the Board’s decision to defer the program. The program must be cost-neutral for new contracts.
· New MPACT plans will be streamlined and require more accurate pricing.
· The assumed rate of return on investments must be realistic. The assumed return on MPACT’s investments had been 7.8% or higher over MPACT’s history. In 2013, the Board voted to lower the assumption to 7.3%. Even this more conservative assumption will need to be carefully watched, as MPACT’s average rate of return has actually been closer to 5.4%.
· Any changes to MPACT cannot affect current contract holders. By law, contracts purchased before the enrollment deferral in 2012 remain backed by the full faith and credit of the State.
The Board and the Treasurer’s Office have maintained communication with the legislative leadership, keeping them updated on the status of MPACT. In January, the Board sent a report summarizing MPACT’s challenges to legislative leaders. Today’s vote to reopen MPACT also reaffirms the Board’s earlier resolution to seek the Legislature’s guidance, particularly regarding the program’s existing shortfall. The decision to reopen will help minimize the funding shortfall, but new contracts will not eliminate it.
After today’s vote, the Treasurer’s Office will work with the College Savings Board to implement necessary rule changes and other modifications to the MPACT program so that MPACT is reopened in a sustainable way, for both taxpayers and our future college students.